By choosing to work with a mortgage broker to find your mortgage deal, you can benefit from their in-depth expertise in the market, which can help to find you the best mortgage deal available to suit your specific circumstances.
Whether you need to use a specialist broker due to having adverse credit or any other circumstances that standard mortgages are not suitable for, or you just want to find the best financial mortgage deal, a broker will help with this.
There are many different brokers available to choose from, but they do not all offer the same level of service and the pricing structures can vary significantly.
In this guide, we provide a comprehensive review of the mortgage broker fees across the market, answering some of the most frequent questions about the subject of mortgage brokers.
After reading this guide, you should be able to decide which type of mortgage broker is more suitable for your budget and to match you with the right deal for your requirements.
What fees do mortgage brokers charge?
The pricing models from one broker to the next can be very different, so you should ask about, or research, the costs before you agree to use your mortgage broker and you should ask for their prices in writing.
These are the different pricing models that brokers operate with:
Some mortgage brokers do not charge any fees at all to the mortgage applicants, as they make their money from charging commission to the mortgage lenders instead. This means that you get their service without any cost to yourself, which will be very welcome when you are paying fees for solicitors and other costs associated with buying a property and moving house.
There are also some brokers that will charge by the hour, where costs can quickly escalate if there are any complications that they need to spend more time on. You should try to get an estimate of how many hours they are going to charge you for, as this should be fairly standard.
Brokers with a fixed charge provide a more transparent approach to their fees but you will still need to make sure that there are not going to be any further costs that are not included in the initial quote. Typically, a fixed fee mortgage broker cost will range between £300-£600, with the average cost in the UK currently sitting at £500, according to the Money Advice Service. This is backed up by recent research we undertook with mortgage brokers across the UK, which revealed that the average amount charged was £559, but with some brokers charging more than £1,000. This fee may be charged upfront or on completion of the mortgage transaction.
With this model, the broker charges a percentage of the mortgage that the applicant is taking out. Therefore, with higher value properties you could end up paying a lot more than the average mortgage broker fee. For example, if you are taking out a mortgage for £250,000 and they are charging 1%, you will be paying them £2,500, which is significantly higher than the average mortgage broker cost.
There are also a number of brokers who will use a combination of these models, for example, they might charge you an hourly rate and then also get commission from the lender. However, it is worth noting that all mortgage brokers receive the commission from the lender. This means that any client fee charged will be in additional income for the broker.
Mortgage broker fees or commission – which is better?
There is not a simple yes or no answer to this question, as it all depends on the quality of your mortgage broker.
According to our recent research, 59% of mortgage brokers across the UK charge fees, therefore most mortgage brokers do charge fees for advice.
However, the price that each mortgage broker charges does not always correlate to the level of service that you will receive.
There are some excellent mortgage brokers that will charge fixed client fees, just like there are some exceptional brokers that operate by not charging the client a penny.
To keep your costs down, the ideal option is to find a reputable broker that will not charge you any costs for their services. At Boon Brokers, we’re proud to offer an exceptional service without any cost to the mortgage applicant.
A good way of finding out whether your mortgage broker is of high quality is to research any feedback and reviews provided by previous clients through a third-party review site such as Trust Pilot.
Sometimes the best approach to deciding on your mortgage broker is to talk to the advisor that you will be working with to see whether you get on with them and trust them to provide you with the best advice.
You don’t want to appoint someone and then feel that they are difficult to work with or are not putting your best interests first. Your gut feeling might just steer you away from a broker that isn’t going to deliver a good level of service.
You should also make sure that any broker that you select is authorised and regulated by the FCA (Financial Conduct Authority), either through a network or directly, as this will provide you with protection if you are given poor mortgage advice.
Is fee-free mortgage advice too good to be true?
When you are provided with something for free, the natural instinct is to wonder whether it is too good to be true.
Of course you would prefer to pay no costs but if the reality is that you are using a poor broker, you could end up worse off financially than if you paid a fee and used a better broker.
However, due to the fact that brokers can operate on a commission basis through the lender, mortgage brokers such as Boon Brokers can give you the highest level of service without incurring you any costs.
Typically, brokers that apply costs will do this because they have large overheads such as employee salaries and office costs to pay for.
At Boon Brokers, business operation costs are kept to a minimum by utilising cutting edge technology that reduces the cost of running the business.
There really isn’t a catch when it comes to fee-free brokers, but as we mentioned previously, you really do need to be confident in the quality of the service that the broker will deliver.
When you are looking at the different broker options available to you, you should be looking for brokers that offer whole-of-market access. This means that they have access to every lender on the market, so they can find the best possible deal available to suit your needs. The survey we at Boon Brokers conducted* found there was a general lack of understanding around what mortgage brokers can or should offer. Worryingly, one in seven of those who have used a mortgage broker didn’t know if they had whole of market access.
You should remember that the financial implication of obtaining a mortgage deal with a better interest rate can be very significant. Over a 25 or 30-year term, even a small percentage of difference could end up costing you thousands of pounds more or less over the full term.
However, you can move to a new mortgage deal once your fixed rate ends, so this is another factor to consider when you are thinking about whether to go with a fee-free broker or one with a charge.
If you are paying an additional £500 or more every two or three years when you switch mortgages, you are going to end up paying a huge amount in mortgage broker costs.
This is why it is a good idea to try and find a high-quality fee-free broker that you trust, so you can go back to each time you want to find a new mortgage deal.
How much commission do mortgage brokers receive?
Typically, a broker will be paid around 0.35% of the mortgage loan size as commission from the lender. So, for a £100,000 loan, this would calculate at £350, or for a £200,000 loan, they would be receiving £700. The lender will benefit from providing a larger loan, so it makes sense for them to give the broker a higher fee for the work that they do in arranging the mortgage.
However, for the mortgage applicant, the mortgage broker will not be doing more work (If any) to find a good deal on a £200,000 loan compared to a £100,000 one for the same applicant. Therefore, they cannot justify charging you a percentage of the loan.
Mortgage commission is a topic that has been heavily scrutinised in the past by regulators, with concerns that high commission fees can lead to brokers recommending specific products that might not offer the best deal to their clients. Research Boon Brokers undertook with 2,000 mortgage holders showed that 13% of people worry a broker will push you into a deal they want you to take because they get better commission*.
However, if the commission was completely removed then it could lead to brokers charging high fees for their services, so this is another reason to make sure the broker you choose is regulated by the FCA.
Is a mortgage broker fee worth the money?
In many cases, using a broker will enable the mortgage applicant to get a mortgage deal that they couldn’t find on the market themselves.
With a lower interest rate deal, mortgage applicants can quickly recoup the £500 that they pay on their broker costs. Usually, the deals a broker can find are much better than the ones you will find with a high street lender, so financially, working with a reasonably priced broker can definitely be worth the money.
However, that isn’t taking into consideration that there are numerous brokers who will find you the best mortgage deals on the market, saving you a large amount of money, while providing that service for free.
If you are planning on going with a broker that charges a fee, you need to look at how their fee stacks up against the savings that you will make by using them, to determine whether they are worth the fee or not.
You should also ask your broker why they apply a charge in addition to the commission, as this will also indicate whether it is worthwhile paying that fee or not.
One broker can go above and beyond what is expected, doing all of the work for you, while other brokers might do the bare minimum of work for their fee.
You should ask the broker what their fee covers before you agree to work with them, so you will know what you are getting for your money. There is a lot of paperwork and other admin tasks involved in arranging a mortgage deal, which can be really time consuming, so choosing a broker that is going to do a lot of the work for you will definitely be a big advantage.
A good mortgage broker will be able to identify the best mortgage deal to suit your circumstances but they should also be able to make the process much smoother.
They will know which lenders will provide a loan to you and for how much, by assessing the information that you provide them with. The better knowledge they have of the mortgage market, the quicker and easier the application process should be for the applicant.
A mortgage broker should also be able to advise the applicant on the requirements of the lender, for example, which documentation they will request.
If they already know what each lender will require from you, before the lender asks for it, this will significantly speed up the process.
If you want the mortgage application to go through quickly, so that you don’t miss out on a property, then this type of insight will come in very useful.
Your broker should have exclusive access to the best deals on the market, deals that you would not be able to get hold of if you were looking directly for lenders. They might have worked with specific lenders for years and agreed a special type of deal that will save you a large amount of money.
What you want from your broker is vast knowledge about the market, as well as their guidance and support to get your mortgage processed as smoothly as possible.
Again, taking a look at reviews of each broker you are considering using, will help you to get a better idea of how much work and effort your broker will provide in order to save you a lot of the hard work.
The reviews on sites such as Trust Pilot should also show you how easy it is to get hold of your broker, as this can be a very frustrating part of the mortgage application process; not being able to ask questions when you need to can hold up the application.
If a client has been unable to contact their broker when they’ve needed to, there is a good chance that they will mention that in their review. You should ask your broker what their working hours are and the best way to contact them.
If you’d like to learn further about choosing the perfect mortgage broker for you, please see our article.
How many homebuyers use a mortgage broker?
Despite the fact a good mortgage broker is likely to be able to find homeowners a much better product than they could secure themselves, well over a third of mortgage holders (39 per cent) have never used one.
We conducted an independent survey of almost 2,000 mortgage holders* to ask how many had used a mortgage broker when securing a mortgage in the past. We discovered that on average 39 per cent of homeowners had never used one, but the number rose to half (49 per cent) of over 55s. This means many homeowners could have reached full ownership of their property – having now paid off their mortgage – without ever having had professional advice to help them secure the best deal. Over a lifetime of mortgage payments that potentially means they’ve been paying out thousands of pounds on unnecessary interest and fees.
Younger homeowners are more likely to consult an expert, with three out of four (74 per cent) of 25 to 34s saying they have used a broker for a home loan.
Regionally, those in the South East and Wales are most likely to have used a mortgage broker, whereas those in Northern Ireland, Central England and Scotland are least likely. Edinburgh was the city where people were least likely to have consulted a broker, followed by Belfast and Norwich. Southampton was the city where homeowners were more likely to have taken advice from an expert, followed by Manchester and London.
Buying a property is usually the biggest outlay that you will ever have and as well as the price of the property, there are many additional costs such as mortgage arrangement fees, interest fees, solicitors’ fees, valuation fees etc.
Therefore, you should be as financially savvy as possible and the more expertise and help you have with your mortgage application process, the better chance you will have of getting the right deal for your specific requirements.
If there are any factors such as poor credit history, or you are self-employed or any other reason that makes it harder to get a standard mortgage, a broker will be the best option for finding deals for your situation.
You shouldn’t get put off with the idea that a free service means is a lower quality service, because brokers like Boon Brokers can give you the best level of service but make their money by charging the lender rather than the mortgage applicant.
However, you should do enough research about the broker to find out whether they are going to be the best option for you. A broker that has many years of experience working in the industry will be able to save you a considerable amount of money because they will know exactly which deal works out best financially, so you should take your time in selecting one.
If you want to save yourself some money then you should select a broker that has a fee-free model but make sure you don’t just pick any fee-free broker, find out as much information about them as you can. Recommendations from friends, online reviews and other online research will help you to form an idea of whether a broker has a good reputation, or if you should stay well clear.